The ‘new normal’ for China’s luxury watch market

    Luxury watch brands hone China retail expansion strategies in anticipation of market recovery later this year.
    Luxury consultant Peter Cheung sports a Van Cleef & Arpels watch in Wan Chai, Hong Kong. Photo: Ghetty Images
    Shilpa DhamijaAuthor
      Published   in Hard Luxury

    Although imports of Swiss watches to mainland China and Hong Kong fell sharply in the first quarter of 2024, luxury watch brands are advancing their retail expansion plans in the region in the hopes of a recovery in later this year.

    From January to March, collective exports of Swiss watches to mainland China and Hong Kong fell an average of 24% YoY, according to the Federation of the Swiss Watch Industry. Following this plunge, the US surpassed the combined import value of mainland China and Hong Kong, becoming the top importer of Swiss watches for the first time in seven years despite a nominal increase in imports.

    In the first quarter of 2024, the US imported 1.03 billion CHF ($1.13 billion) in Swiss watches, while mainland China and Hong Kong imported a combined total of 1.02 billion CHF ($1.12 billion).

    Pre-Covid – in the first quarter of 2019 – the collective export value of Swiss watches to mainland China and Hong Kong was 1.17 billion CHF ($1.28 billion), more than double that of the US at 540.9 million CHF ($592.21 million).

    Cautiously expanding#

    Mainland China’s luxury market has made a subdued recovery after the reopening of borders in 2023. However, by the end of the decade, the country is projected to become the world’s top luxury market.

    According to a Bain & Company report released late last year, Chinese consumers will lead global luxury market consumption and mainland China will contribute to up to 40% of worldwide luxury spending by 2030. This makes retail expansion in the region imperative for luxury brands despite the current market slump.

    French luxury watch and jewelry brand Van Cleef and Arpels is following a cautious expansion strategy in mainland China by prioritizing the launch of new boutiques in developed luxury markets in the eastern and northern parts of the country.

    Meanwhile, the brand will keep a safe distance from China’s southern coast “because of its proximity to Hong Kong [a tax-free shopping district] and the clear price gap,” Laura Lai, managing director of Van Cleef and Arpels, China, tells Jing Daily.

    Van Cleef and Arpels entered the mainland China market in 2010 and opened around two boutiques per year until 2020, when it decided to increase boutique openings to three or four every year, “because the Chinese were making their purchases within the country,” says Lai, adding, “and the trend continues.”

    Van Cleef and Arpels will open its fourth boutique in Beijing this summer. It already has five in Shanghai, and as Lai says, “both Beijing and Shanghai are important for us as they are popular travel hubs and the buyers here are sophisticated.” Lai adds that sales in these two cities tend to shape luxury consumption trends in the rest of mainland China

    According to Lai, provincial cities with populations of over 10 million also show potential for luxury watch market growth in China, with Hangzhou and Nanjing in particular performing well for Van Cleef and Arpels. The brand will open its first boutique in Suzhou later this year.

    Bulgari, known for its Serpenti and Octo Finissimo watches, will increase its mainland China store count “slightly” in 2024, according to Antoine Pin, managing director of Bulgari’s watch division.

    “We need to get a better understanding of the market and cannot go too fast,” says Pin, adding that the expansion will be seen mostly in tier-three cities. The LVMH-owned watch and jewelry brand already has around 65 sales points in mainland China and 15 in Hong Kong.

    What is the ‘new normal’?#

    So far in 2024, sales for Bulgari in mainland China and Hong Kong have been “Okay. Not bad,” says Pin, who adds that the market is normalizing after the Covid-19 lockdowns and “extraordinary growth over the last decade.”

    But, what will be the “new normal” for the luxury watch market in mainland China and Hong Kong?

    According to Antoine Pin of Bulgari, “If China manages to get to the (approximately) 5% (GDP) growth that they are talking about based on proper consumption development, then we will have an amazing future in front of us.”

    Pin adds that this economic growth would increase the purchasing power of China’s middle class, noting, “What builds the success of the luxury industry is the middle class. The volume of watches we sell is important.”

    For Van Cleef and Arpels, business so far in 2024 has been “stable and moving in the right direction,” according to Laura Lai. Looking forward, Lai predicts that the economic issues of 2023 are unlikely to change in 2024, further delaying a recovery to pre-pandemic levels that the luxury industry is waiting for.

    However, Lai says, “this slowdown is unlikely to impact the luxury consumption of the ultra-high-net-wealth people in China.”

    Lai says that the existing luxury watch customer base is already substantial in mainland China. Yet, Lai cautions that the “new normal” for the luxury watch market in China is one in which “the number of newer customers in this segment will not be as high as before,” adding that competition among luxury watch brands to capture this audience is set to become fiercer in the months and years ahead.

    Discover more
    Daily BriefAnalysis, news, and insights delivered to your inbox.